Buyer Tips

By: Aim Business Brokers  08-08-2010
Keywords: business for sale, Business Brokers, businesses for sale

Your search for a suitable business can be a complicated task. Throughout the process however it's important to keep an open mind while searching for something that will fit your particular needs, talents, skills and lifestyle. As business brokers we have many different types of businesses for you to consider, but you need to remember that the business that matches all of your requirements exactly is rare – you can often achieve that “perfect" business only by adding your own personal touches to an otherwise “sound” business.

What should you look for?
As a buyer you should start by giving some thought to the type of business that suits your talents and capabilities, and which you would feel comfortable owning and operating. "Pride of Ownership" is an important ingredient for success. The next thing is to realistically determine what level of financial return you want from such a business. To be considered seriously it must (at the very least) supply you with enough income - after making any interest/loan payments – for you to pay your bills and reimburse you for your efforts. (Of course you will have your own ideas and plans so you need to keep an eye out for what you can do with the business - how you can improve it and make it more productive and profitable. It all depends on you!) The other key question at this stage is how much you are prepared to invest to buy the business. There is very little to be gained from looking at any business that has a purchase price well in excess of what you are willing to pay.

“Why should I use a business broker?”
A professional business broker can be very helpful in your search for a suitable business. They can provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own. Business brokers are also an excellent source of information about businesses and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business broker will assist with the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting other professionals who may be able to assist you.

“Why should I buy a business rather than start one?”
An existing business of course has a track record, and it has demonstrated that there is a need for that product or service in a particular location. This should be supported by financial records along with other information about the business. Most sellers will also stay on and train you as the new owner and teach you the specific intricacies of running the business.

Get the basic facts
Once you have identified a suitable business, you should set about collecting some preliminary information, covering price, terms, sales/income level, cash flow, and general location. At this point, don't worry too much about the full price - it's important, but at this stage it’s enough that it is broadly within your budget. Examine the basics of the business, making sure that it fits within with your requirements, and even arrange (via your broker) for an on-site inspection with the seller.

Visit the Business
Before you talk to the owner, you may wish to visit the business anonymously to see if you like the location and the looks of the business itself - both inside and outside. Pretend that you are a customer. There is no point in going any further if you don't like the physical location of the business or the appearance of it. Once you are satisfied, you can ask the Broker to make an appointment with the seller, to formally inspect the business.

Expand on the basic facts
If the business still looks interesting, it's time for you to get more detail:

1. How long the business been operating? How long under the current owner?
2. What is the rent? How long is the lease?
3. What have been the Sales/Profits for the past few years?
4. Can the Seller support the figures you have been provided with?
5. What Plant & Equipment items are included in the purchase price?
6. How is Stock/Work-in-Progress to be factored into the final price?
7. Why is the current owner selling?

It’s not yet time to have the seller's books and records checked out completely. There will be plenty of time for that, plus review any other issues, during the due diligence phase. At this time, you should try to get answers to any questions that may have a direct bearing on whether you may want to own and operate this particular business.

Make an Offer!
Once you have all of your basic questions answered, and you now want to proceed with purchasing the business, it’s time to make an offer (subject, of course, to verification of all the information with which you have been provided). The main purpose in making an offer is to see if the seller will accept your price and terms - it makes little sense employing outside accountants/advisors and going through the time and expense of due diligence unless you can reach agreement with the seller on the financial arrangements. Remember that your offer is subject to verification of the information that has been provided to you. The offer is then presented to the seller who can choose to accept it, reject it, or counter it with his or her own offer. You then of course can choose to accept or amend the seller’s counter proposal, or reject it and walk away from that particular business completely.

Once you and the seller agree on the price and terms, the next step is for you to do your "due diligence." You may choose to do it yourself, or bring in outside advisors - the choice (and the burden) rests entirely with you as the buyer. Once you have double checked and approved any areas of concern, your purchase of the business can proceed through to settlement. You will then join the many others who have chosen to become self-employed!

What does it take to be successful?
Certainly you need adequate capital to buy the business and to make any improvements you want, along with maintaining some reserves in case things start off slowly. You need to be willing to work hard and, in many cases, to put in long hours. A business owner frequently has to be the cleaner, errand boy, employee, bookkeeper and "chief bottle washer!" Too many people think they can buy a business and then just sit behind a desk and work on their business plans. Owners of small businesses must be "doers."

Going into business for yourself
can be a daunting prospect, and there are simply no guarantees. At some point, after all of your searching and investigation is completed, you will still have to make that "leap of faith" that is necessary to proceed with the purchase. You will have to work hard, perhaps even "tighten your belt" a little and perform many different jobs to be successful in your own business. However if running your own show, making your own decisions, not having to worry about job security (remember, no one can fire you from your own business), and just being on your own are important - then owning a business is for you. After taking this leap of faith, almost all business owners will tell you that they would never go back to being an employee.

Keywords: business broker, Business Brokers, business for sale, businesses for sale